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Business outlook for medical specialists

By Donna M. Sherwin & Jeffrey S. Yablon, M.D.

For the past decade or so physicians have had their once relatively and predictably comfortable lives challenged by the managed care environment. No longer is there an automatic right of passage to a life of material wealth for specialists who dedicate a considerable portion of their lives to the study of medicine. No longer can one assume that the financial rewards of practicing medicine will be commensurate with the financial and non-financial commitments made.

No longer can the physician make patient care decisions autonomously. Further, reviewers on both the hospital and insurance sides are very often perceived as nuisances at best and obstructionists at worst. While some would argue that physicians are to a large extent responsible for the spiraling costs of health care and therefore that they are now suffering the consequences of past transgressions, we need to ask ourselves when and how this will end?

The Cause

It is no secret that managed care was introduced initially to contain health care costs for a myriad of reasons beyond the scope of this article. However, managed care could not have attained such a strong hold if physicians as well as hospitals were not willing and at times anxious to contract with managed care companies. The impetus for practitioners to enter into these, often times less than optimal contracts came from their desire to capture or at least maintain market share in an environment in which there was and is an oversupply of physicians.

The net result in the Philadelphia marketplace is a virtual dictatorship by Blue Cross and its plans and Aetna U.S. Health care and its plans, which allows for deep cuts in physician reimbursement. Unfortunately, the same forces have contributed to physician specialist’s inability to fight Medicare’s reimbursement rates. This has rapidly translated into diminished incomes and dissatisfaction for virtually all medical and surgical specialists who are now clearly working longer hours and making less money.

Attempted Solutions

Many collective attempts have been made to reverse or to at least halt the perceived inequities. For the past five or six years virtually every stand alone physician practice has become prey to large health care systems seeking to amass a large enough base to effectively negotiate with managed care companies. Many physicians seeing this as a way to survive grasped at the opportunity to become employees. Others chose to consolidate as a way to keep managed care companies at bay. Still others joined forces in an attempt to unionize. Sub-specialty societies actively pursued remedies locally as well as on a national level. Physician networks and physician insurance companies were formed.

None of those solutions has been effective to date. Competition to acquire practices was fierce due to a high concentration of health care facilities in and around metropolitan areas. This was further exacerbated by the self imposed short time frame to ensure an acceptable share of the market. The end result was that poor purchasing and selling decisions were made, which has ultimately led to financial stress and increased dissatisfaction on the part of both physicians and hospitals. Therefore, many acquired physicians are now seeking ways to regain their independence.

Consolidations, sub-specialty societies and physician networks have failed virtually due to lack of physicians inability to organize and collectively bargain. Since physician insurance companies are still in their infancy, it is difficult to determine their effectiveness. However, preliminary observations suggest that the expense of such a long term undertaking will prohibit their success.

Managing Managed Care

Physicians no longer have the luxury of simply providing patient care, they must also be business people; their practices must run like businesses. Unfortunately, the same personality traits and skills that make a person a good doctor often conflict with those that make individuals successful in business. Further, the education that one receives in medical school does not sufficiently prepare him/her for the business world in which he will need to be an expert negotiator and need excellent management, marketing and finance acumen. Nonetheless “managing managed care” is the only way a physician can or will survive in this turbulent environment.

The survivors will be the ones who can negotiate the most lucrative contracts and who will find the appropriate mix of patients to ensure an optimal use of resources. They will be the persons who can successfully minimize practice expense while implementing policies and procedures to maximize cash. Maximizing reimbursement which has been a much used buzzword over the past several years is often thought of as optimal coding practices. However, while maximizing cash flow certainly includes appropriate and accurate coding, it is not limited to the coding process. To maximize reimbursement one must perform every business office function with cash flow in mind, from front desk functions to the claims review process.

Of course this will necessitate a more sophisticated staff than that historically found in smaller physician offices. It will also require the staff to remain current in all aspects of third party billing. Both of these suggestions are costly, which seemingly contrasts with the second part of the solution; that is to minimize practice expenses. Ironically, many physician offices have actually had to lay off employees to survive. Practitioners then are fighting and will continue to fight an uphill battle to keep from going under.

While none of this appears to be beneficial to the consumer, either in the short term or the long run, currently the public in general seems to be completely apathetic to the physician’s plight. There was a time in our recent history when patients would have come to the rescue of their doctors. However, now when physicians need it the most, the public is not interested in helping them to fight the battle which, if lost, will lead to the demise of health care as we know it today.

The Net Result

Many physicians are deciding not to continue the battle. For example, neurosurgery has experienced multiple early retirements and several neurosurgeons have left the Philadelphia area hoping to stave off similar problems in other markets. Still other neurosurgeons are looking for alternative careers to practicing medicine. If practicing neurosurgeons are becoming disillusioned, one might ask what the future looks like to the brightest of students who are just making the decision to enter medical school. Are they willing to invest at least eight to twelve years of their lives and hundreds of thousands of dollars to enter a field in which they won’t enjoy the social and financial status of their predecessors? If not, will we have significantly limited access to health care or will the standards of acceptance into medical schools be reduced to attract enough students to provide health care services to the area? It appears that either alternative would leave us with health care system very different from what we have today and most likely less satisfactory to both consumers and providers.

Some may argue that this is the price we have to pay to get medical costs under control. However, it appears that any savings that may have been realized from introducing managed care have simply shifted from physicians and hospitals to administrative costs, and to insurance companies and their investors. To ensure the future of specialists, it is our opinion that physicians must gain bargaining power through collective organization and consumers will need to become more sophisticated and knowledgeable about health care issues.

Donna M. Sherwin, CPA, is the president of PBSI a staffing, consulting and training organization in Wayne, Pa. Jeffrey S. Yablon, M.D., is a neurosurgeon in Chester, Berks and Lancaster Counties.

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